Whither Islamic Banking?

Islamic banking is visibly on the rise across the globe, supported by a growing clientele, both Muslim and non‐Muslim, although it has yet to demonstrate that it is a viable alternative to conventional banking. Islamic banking is still under the shadow of conventional banking, not only with products that are strikingly similar to those offered by conventional banks, but also with conventional banks having a strong presence as stakeholders in the Islamic banking industry. Islamic banking is still in the early phase of a presumably long evolutionary process, apparently stuck in the initial phase of product differentiation. Islamic banks are competing with conventional banks rather than among themselves, which does not augur well for innovations and creativity, as it tends to keep them preoccupied with modifications of conventional products with Shari'ah compliance. Islamic banks have arrived at a new crossroads. They could either continue on the same path of what may be termed as ‘head‐on competition’ with conventional banks or change their direction in favour of a ‘niche market’ strategy.     

An Exploratory Study of Managers' Perspective of Work‐Life Balance in Nigeria: A Case Analysis of the Nigerian Banking Sector

This study describes an exploratory research of managers' perspective of the concept of work‐life balance (WLB) policies and practices in Nigeria. This is done through in‐depth case studies of 20 banks in the banking sector. The data set is comprised of responses from 102 middle line managers in the Nigerian banking institutions. A review of the extant literature on WLB initiatives in the banking sector revealed that there is a dearth of knowledge on WLB policies and practices in an African context. In an attempt to fill the gap in the literature, this study examines the range and scope of WLB practices, managers' perception of WLB, and the forces helping or constraining to shape the choices of work life balance practices and policies. The findings reveal that there is diversity in terms of how middle‐line managers understand and experience WLB initiatives in Nigeria. Another finding highlights the practice of favoritism in most banks using WLB initiatives. In addition, the study shows that cultural sensitivity affects how WLB is appreciated and utilized. The study suggests some policy implications in the form of support for WLB policies in this context. © 2013 Crown copyright.     

The role of customer online brand experience in customers' intention to forward online company-generated content: The case of the Islamic online banking sector in Palestine

The purpose of this study is twofold: Firstly, to assess the impact of customer online brand experience (COBE) with online banking on customer's intention to forward online company-generated content (CGC). Secondly, to explore the role of online brand community engagement (OBCE) and the perceived trust of brand community page (BCP) as mediating variables between COBE and the intention to forward online CGC. This research conducted an online survey among various Islamic bank customers in Palestine who were members of online brand communities (fan pages) on Facebook. 375 valid responses were collected and results revealed that COBE exerts a dual influence on intention to forward CGC. This study is a pioneering empirical research on the role of OBCE in customers' intention to forward online CGC within the fast-growing Islamic banking industry. This study contributes to fill this research gap by assessing the effect of COBE on OBCE and intention to forward online CGC within the context of the Islamic online banking sector in Palestine. In this sense, this study is a first-of-its-kind research on the role of experience on customer engagement with regard to online brand communities of Islamic banks.     

Systemic risk,Islamic banks,and the COVID-19 pandemic: An empirical investigation

While operating side-by-side with conventional banks, in a dual-banking system, the systemic risk profile of Islamic banks can be different due to their unique business model. The objective of this study is to understand the evolution of systemic risk in dual-banking systems and determine whether there are any differences in the systemic risk profiles of conventional and Islamic banks during the COVID-19 pandemic. This study also identifies the determinants of systemic importance (measured using spillover indices) of financial institutions. The sample includes ten countries where the Islamic banking sector is considered systemically important and covers the period from November 2015 to November 2020. The empirical results indicate a significant increase in systemic risk, in the sample countries, during the first half which is followed by a recovery in the second half of 2020. Comparative analysis shows that Islamic banks have similar systemic vulnerabilities to systematic and idiosyncratic factors during the exogenously induced real economic shock of the COVID-19. However, Islamic banks pose significantly less spillover to others relative to conventional banks while earning abnormal returns. The results are robust to the inclusion of macroeconomic factors and alternate estimation methodologies. The findings of this study provide valuable insights for the regulators of dual-banking systems.     

The link between corporate social responsibility and customer loyalty: Empirical evidence from the Islamic banking industry

Increased support from customers for Islamic financial services is very important to create resilience and competitiveness in the Islamic banking industry. By highlighting certain social activities, this paper estimates the role of Islamic banks’ CSR in influencing customer loyalty, both individually and through the integrated roles of image, trust, satisfaction, and reputation. These paths explore how CSR makes customers impressed, convinced, satisfied, amazed, and ultimately loyal to Islamic banks. The empirical analysis of partial least square structural equation modeling (n = 283) has shown that CSR directly and positively impacts loyalty. Indirectly, these two aspects have an insignificant relationship through the serial roles of image-reputation and satisfaction-reputation, but significant through the single role of reputation and the serial role of trust-reputation. This study has resulted in an updated prediction model of Islamic banking customer loyalty. The practical implication lies in the importance of developing CSR to generate trust and reputation which ultimately increase customer loyalty toward Islamic banks.     

Underpinning the benefits of green banking: A comparative study between Islamic and conventional banks in Bangladesh

This study aims to compare environmental motives and performance of conventional and Islamic banks in Bangladesh. Green compliance index was developed based on the Bangladesh Bank (the central bank of Bangladesh) guidelines whereas information regarding governance variables is collected from the annual reports of 9 Islamic and 31 conventional banks. Results show Islamic banks are more environmentally friendly compared to their conventional counterparts. Board size is negatively related to green compliance whereas board independence and auditor's type do not have any significant influence on green compliance for both clusters of banks. Compliance with green banking policies enhances the reputation for Islamic banks and accountability and profitability for conventional banks. Results of this study provide useful information for regulatory authorities to formulate policies that are conducive to enhance bank's environmental performance.     

Loyalty,naivety and powerlessness among Norwegian retail bank customers

The quantitative analysis presented in this paper builds on a qualitative focus group study of mobility among bank customers. The main finding from the focus group study was that mobile bank customers had a reflective – often critical ? relation to their banks, while the immobile bank customers had an unreflective – often trusting – relation to their banks. The study also resulted in a typology identifying different bank customer orientations. In the present paper, this typology has been operationalized and modified for further quantitative estimation and investigation. Nine different bank orientations are distinguished, and the results indicate that at least two of three bank customers do not regularly monitor their banking terms and conditions. In other words, it is reasonable to believe that the ordinary bank customer is not acting as expected according to the theory of well‐functioning market mechanisms. Resourceful consumers, with high incomes and education levels, tend to be more financially oriented than others. When people with meagre financial resources tend to end up in the more unfavourable banks, this is not solely a result of the banks’ own discrimination of the poor; it is also due to the fact that people with high incomes and education levels are more likely to monitor their banking conditions than people with low incomes, irrespective of whether or not they have bank loans. The quantitative material analysed was collected in February 2007 by computer‐assisted telephone interviews. One thousand randomly selected respondents answered the questions.     

Islamic financing and bank risks: The case of Malaysia

We examine whether Islamic financing can explain three important bank risks in a country with a dual banking system: credit risk, interest‐rate risk, and liquidity risk. Using Malaysian data, we find that commercial banks with Islamic financing have significantly lower credit and liquidity risks but significantly higher interest‐rate risk than banks without Islamic financing. There is also evidence that bank size is significantly related to credit risk; the proportion of loan sales to total liabilities and bank size are significant determinants of interest‐rate risk; and off‐balance‐sheet financing, the extent of securitization, loan volatility, bank capital, and bank size are statistically significantly related to liquidity risk. © 2005 Wiley Periodicals, Inc.     

Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and their motivations for doing so, considering the Japanese government’s requirements for regional financial institutions to actively stimulate their local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures containing active high-performing companies. Hence, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes to the clarification of why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy.     

Effects of communication and financial concerns on banking attitude-behaviour relations

Despite extensive discussion of the concept of Islamic banking, which is based on the fundamental doctrines of Islamic law (Shariah) and Islamic economics (prohibition of interest and profit-loss sharing), few studies have explored the factors that potentially affect behaviour intentions among customers. This study investigates direct and moderating effects of communication and financial factors on customer attitudes and behavioural intentions towards Islamic banking. Data were collected from the customers of Islamic banks and the Islamic banking divisions of conventional banks in Malaysia using online surveys. The hypotheses were tested using hierarchical regression analysis. The results suggest that relationship marketing, informative advertising, perceived benefits, and profit-loss sharing are important determinants of behavioural intentions among both Muslim and non-Muslim customer groups. This study also found moderating effects for most of the conceptualized moderating variables, particularly attitude interactions with informative advertising, ease of online banking, and the principle of profit-loss sharing. There are both notable similarities and differences in the results for the two customer groups. The findings imply that different strategies should be used both to retain existing customers and attract new ones.     

Sources of TFP growth in the Malaysian Islamic banking sector

This paper attempts to empirically analyse productivity changes of the Malaysian Islamic banking sector during the period of 2001–2004 by applying the non-parametric Malmquist productivity index method. During the period of study, the empirical findings suggest that the Malaysian Islamic banking sector has exhibited productivity progress during the earlier years before declining during the latter years. The results suggest that foreign banks have exhibited higher productivity levels compared with their domestic counterparts during the earlier years, while the domestic banks’ productivity levels were relatively higher compared with the foreign banks during the latter years.     

Principles,problems and perspectives of Islamic banking

Since the late 1970s, financial institutions (banks, investment companies, insurance companies) have grown up in many countries in the Moslem world with the intention of conducting their business in accordance with Islamic, or Shariah, law. Above all else, this means business involving no interest payments. The following article explains the most important principles of Islamic banking and outlines some of the problems which appear to be most central to this sphere.     

Bank lending,deposits and risk-taking in times of crisis: A panel analysis of Islamic and conventional banks

In this study, we conduct a panel analysis of Islamic and conventional banks to ascertain whether Islamic banks are able to sustain financing supply and whether its growth is higher than conventional bank lending growth in times of stress. For concreteness, we also assess whether the sustained financing supply of Islamic banks is justified by a concomitant increase in Islamic deposit growth and is not linked to excessive risk taking. Utilizing a panel sample of 25 Islamic banks and 114 conventional banks from 10 dual-banking countries, we observe sustained financing supply by Islamic banks but significant reduction in the lending growth by conventional banks during the crisis period. The results further suggest that the financing growth of Islamic banks is higher than the lending growth of conventional banks during the crisis period. However, we find no clear evidence that the deposit growth of Islamic banks behaves differently during the period. Finally, there is no indication to suggest that Islamic banks exhibit excessive risk taking in times of stress. Our results contribute to the evidence supporting the contributive role of the Islamic banking system to financial and economic stability.     

The determinants of Islamic bank capital decisions

We report new evidence on the bank and institutional determinants of Islamic bank capital ratios in 28 countries between 1999 and 2013. Overall, we find that smaller, more profitable, and highly liquid Islamic banks are more highly capitalized. Additionally, improvements in the economic and financial environments and market discipline within a country correspond with higher Islamic bank capitalization. The results shed light on the impact that Sharia'a law restrictions have on Islamic banking capitalization. Our findings are most robust to banks that choose to hold capital well in excess of that required by regulators, consistent with traditional capital structure theory. Our results highlight the role that stable economic and political systems play in improving bank capitalization and reducing financial sector risk. By reducing political instability and corruption, improving legal systems, and encouraging access to capital markets, policymakers may incentivize managers to make financing decisions that increase the capitalization of the Islamic banking industry in developing countries.     

Efficiency and total factor productivity change of Malaysian commercial banks

This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.     

对银行排队原因的探究及建议

本文通过对银行排长队现象的分析,分析了社会、银行本身和人民各方面的原因,阐述现在银行业存在的问题和不足,试图探寻银行将来改革和发展的方向,谋求在将来人民币业务完全开放后,国有银行发展的新方向以及解决现在问题的途径和方法。     

Socially responsible investment: insights from Shari'a departments in Islamic financial institutions

Islamic financial institutions (IFIs) are emerging as prominent players in the financial world and are increasingly known for their conservative socially responsible investment (SRI). Being the Shari'a regulators and monitors of IFIs, the Shari'a departments are expected to implement the Islamic perspective of SRI – drawn from Shari'a principles – in their respective institutions. The purpose of this paper is to develop an SRI framework applicable to IFIs and other Shari'a compliant entities and assess its applicability within Shari'a departments of two Islamic banks. This paper involves cross‐case analysis based on interviews with Shari'a department officials in two settings differentiated by their respective independence. The proposed framework consists of required, expected and desired SRI aspects as applicable to IFIs. The findings reveal that the required aspects are uniformly observed by the two cases. There are, however, variations when it comes to observing the expected and desired ethical SRI aspects that may be driven by the independence of the Shari'a boards. This inconsistency and non‐adherence of expected and desired aspects may lead to reputational risks in the long run.     

How Islamic banks deal with problem business situations: Islamic banking as a potential model for emerging markets

Models of emerging markets often ignore corporate crises and business failure and are based on research in western economic situations, assuming western institutional patterns and attitudes. This study is based on an empirical analysis of companies in the GCC region of companies within the Islamic Banking System. A “sharp‐bending” orientation model is used to review the role of banks and their methods of managing difficult client situations, triggering early problem‐recognition, and the sequence of recovery. As many emerging markets have large Moslem populations and as Islamic banking continues to be a vibrant growth sector, these findings have wider implications. © 2005 Wiley Periodicals, Inc.     

Clement M. Henry and Rodney Wilson, eds. The Politics of Islamic Finance. Edinburgh: Edinburgh University Press, 2004. vi + 307 pp. ISBN 0-7486-1837-6, $30.00 (paper).

Clement Henry and Rodney Wilson have assembled twelve essaysabout Islamic finance—six about thematic issues and sixabout case studies of Sudan, Kuwait, Jordan, Turkey, Tunisia,and Egypt—plus an introduction and conclusion. Henry and Wilson’s introductory chapter is an excellentsummary of the phenomenon of Islamic banks, including theirorigins, size, and banking practices. The banks largely datefrom the mid-1970s. Purist Islamic economists thought Islamicbanking should be based on profit sharing, in which the depositor’sfunds are     

An Integrated Model of Quality for Mass Services in the Context of the Ghanaian Retail Banking Sector

This study draws upon the service literature and operationalizes the investment model in the services domain to examine factors that contribute to customers’ desire to maintain service relationships with firms (i.e., retail banks) in an emerging economy in sub‐Saharan Africa: Ghana. We empirically test the explanatory power and robustness of the investment model using 218 customers of various banking institutions in Ghana. Results from partial least squares—structural equation modeling (PLS‐SEM)—reveal that (1) service quality is positively associated with customer satisfaction, investment size, and customer commitment; and (2) while customer satisfaction is positively associated with customer commitment, both investment size and quality of attractive alternatives are not associated with customer commitment. Interestingly, we found investment size to have a positive association with customer commitment only when fully mediated by customer satisfaction. Our model reveals that service quality and customer satisfaction predict 79.3% of the variation in customer commitment toward maintaining a service relationship with their retail banks. Discussion and managerial implications conclude the article. © 2015 Wiley Periodicals, Inc.